Insurancenotes

Unit 4– Insurance | H1 Notes
Keyword: Insurance is protection against a loss that may happen.
Keyword: An actuary calculates the amount of money you will pay for insurance. (Premium)
How to Take Out Insurance
1. Contact the insurance company. Insurance brokers may be used to gain advice on the best
insurance to buy. They are independent from insurance companies.
2. Fill out a proposal form. This is an insurance application form and should be filled out with utmost
good faith. It includes all relevant information about the insured party.
3. A cover note is issued if the insurance is accepted by both sides.
4. A policy is drawn up – this is an important legal document detailing the insurance coverage.
How to Make a Claim
If a risk occurs, you can fill out a claim form describing what happened.
1. An assessor will decide how much money you are owed for compensation. (They assess the
situation.)
2. The insured party may have to pay a policy excess – this is a sum of money previously agreed upon.
It is a proportion of their claim. This is often called the excess clause.
Principles of Insurance
Utmost Good Faith – when taking out insurance, all relevant details must be disclosed and you
must remain truthful.
1. Insurable Interest – the person taking out the insurance must gain from the item insured's
existence and suffer it's loss ie you cannot insure your neighbour's car but can insure your own.
2. Subrogation - When the insurance company compensates the insured party, any legal right the
insured party has to the item insured then passes to the insurance company.
3. Contribution – if you take out insurance with more than one insurance company and make a claim,
the two insurance companies will contribute to the cost of the compensation ie you cannot receive
compensation twice.
Insurance| H1 Notes 1
4. Indemnity – you cannot make a profit from the insurance company. Eg if you buy a car for €20,000
and insure it for it's full value but it is then in an accident a year later, you will only receive
compensation for the value of a one year old car.
Average Clause
• Average Clause states that if an item is under insured and a partial loss is suffered, then the insured
party is only entitled to a proportion of the compensation.
• Formula:
Average Clause = Value Insured x Loss Suffered
Actual Value of Item
Types of Insurance
• Building and Contents– protects against fire, burglary etc. Both households and businesses can
get this.
• Motor Insurance – third party compulsory by law. Needed by both households and businesses who
have vehicles. 3 types – 3rd party, fully comprehensive, 3rd party fire and theft.
• Health Insurance
• PRSI – (compulsory by law.) All employees must pay. Paid by businesses also (Employers PRSI). It
is used by the government to pay social welfare and maternity benefits.
• Product liability- business insurance used to compensate people due to damage or injury caused
by the company's product.
• Public Liability – business insurance used to compensate members of the public due to accidents
that occurred on company property.
• Employer's liability – business insurance used to compensate workers for accidents at work.
• Fidelity Guarantee – business insurance used to insure against loss from employee theft.
• Goods in Transit - business insurance used to cover losses obtained when goods are in transit.
Similarities and Differences Between Household and Business Insurance
Similarities Differences
Both look around for best prices. Businesses pay higher premiums.
Both pay PRSI. (By law) Businesses have more risks.
Both minimise risks (alarms, security Businesses must deduct PRSI from wages of
systems etc.) employees.
Both must complete forms.
How to Manage Risk
1. Identify risks
2. Reduce the risk as much as possible – such as with alarms.
3. Take out insurance on the risk.
How to Reduce Premiums
• Health and safety training

• Burglar alarms
• Fireproof materials
• Clear fire exits and evacuation plan
• Security cameras

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Unit 4– Insurance | H1 Notes

Keyword: Insurance is protection against a loss that may happen.

How to Take Out Insurance

How to Make a Claim

Average Clause = Value Insured x Loss Suffered

Actual Value of Item

Both pay PRSI. (By law) Businesses have more risks.

Both must complete forms.

How to Manage Risk

How to Reduce Premiums

• Health and safety training

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